Collecting Art: Art as investment
17 March 2021
There are many reasons why people collect art. The most obvious being that many buyers simply appreciate art; they enjoy having original works of art in the house and there’s the pleasure of connecting with artists they wish to support. Sometimes people buy art to impress or to elevate their position in society, and sometimes art is bought purely for investment. Whatever the reason for buying art, the question of price and whether a work will increase in value is one that is asked in many cases.
If you had asked me 15 or 20 years ago, I would have said that you should not regard art as an investment, since it is risky, and that you should always buy something that you enjoy looking at and pay what you are prepared to pay for it. After all, you need to live with the work and not regret what you see every day; an increase in value should only be a bonus.
However, the art market is forever evolving and so are views around investing in art. In the last ten years numerous art works have sky-rocketed with sellers seeing huge increases in their initial layout. There have also been obvious changes in the art market, mainly relating to Contemporary Art and the digital arena. Particularly since the start of the pandemic the digitisation of the art market has accelerated, and together these changes have led to many more discussions around investing in art.
With the increase in digital presentation of works through artists’ websites and social media channels, and the myriad of online auctions and art fairs, the threshold for entering the art market has been lowered. Previously art buyers and collectors may have felt intimidated walking into an art space and having to ask the price of a work, but now that we can almost hide behind a screen, it is much easier to engage with the art market.
Buying works of art online is not a new phenomenon but the amount of works sold and the type of collectors who purchase this way has changed over the last ten to twelve years. Initially buying online was a preferred way for traders for example, who saw buying art as a commodity and found online transactions, where prices can be evaluated just like trading stocks and shares, an efficient way to purchase art.
Nowadays many more buyers are confident to purchase art online. Since the start of the pandemic Instagram has become the third most popular platform to sell art with many artists setting up their own accounts and websites rather than selling through the traditional gallery route. And it isn’t just low value works that are sold, last year 7% of sales were for works over £5,000 and some works sold for more than £20,000. The transparency of online buying with prices publicly displayed has also led to increased sales, with some sellers reporting transactions six times higher than before. For some the age range is also surprise. Often perceived as a means of buying by the young, the average age of online collectors though is those in their fifties or older, many of whom have the means and time to collect.
In addition, there has been a paradigm shift in the art world through sales of digital art works. Blockchain technology has opened up a new world and sites such as Nifty Gateway have become incredibly popular by those who would never have set foot in a gallery. OpenSea, another NFT (non-fungible token) platform currently lists close to 14 million artworks; the pandemic has accelerated the sale of crypto art beyond imagination. The number of hashtags #cryptoart and #nft on Instagram are just a few to indicate that this market is exploding and here to stay. NFTs are attracting not just the self-proclaimed geeks but also top end buyers. This week Christie’s became the first auction house to sell a standalone NFT work by the artist Beeple (whose real name is Mike Winkelmann). The starting bid for this work Everydays - The First 5000 Days (a collage of 5000 Everydays, drawings made and posted online daily since May 2007) was $100, within about a week it reached £6.6m and after frenzied bidding it eventually sold for a staggering $69m. Christie’s even accepted Ether (a cryptocurrency) for this sale. With well-known figures such as Elon Musk and other tech investors building NFT art collections it is no surprise that this has added to discussions around investing in art, crypto or non-crypto.
Of course, there is an understandable hype around NFTs and investing in digital, which may feel speculative, but it has been proven that physical works of art by high end artists are, at times, a better investment than say stocks or shares. Some artists have outperformed other investments; Warhol trended like SNP stocks and even exceeded it. We’ve seen that when interest rates go down, people move away from the stock market and flock to the art market.
Partly as a result of the current economic landscape and the accessibility of buying art during the COVID lockdown many more people are looking at buying to invest rather than buying for appreciation. Several art investment platforms such as Maecenas or Masterworks have sprung up and offer the possibility of owning a percentage of a work by blue chip artists such as Andy Warhol or Pablo Picasso. Investors can buy an asset token like a share and these are registered on the blockchain. Of course, this does mean that you won’t have the art on the wall and enjoy the physical benefits of being surrounded by beautiful pieces.
And whilst the prospect of investing in art sounds hugely exciting It is crucial to remember that it remains a risky investment. Three months ago, most of us had never heard of NFTs and it is probably too early to judge how crypto art is going to develop. On the other hand, blue chip artists may not go down in value, but you need to have substantial funds in order to purchase these works in the first place. More crucially you’ll need to have the knowledge or the help from an art advisor as it is paramount to know about an artists’ oeuvre. Not every period or work by Warhol is equally valuable for example. Not every print is from an authorised edition and there remain plenty of fakes in circulation.
Besides, tastes change and as with property or the stock market values go up as well as down but if you hold on to a good work long enough, you’ll often find the market picks up again. If you are considering starting a collection or are looking to buy an investment piece, do talk to an independent art advisor. Whilst they would never guarantee an increase in value, good art advisors, however, will have a reasonable idea of whether a work will hold its value. Even if there are no art market results available yet, an experienced art consultant will have a gut feeling (or an ‘eye’ as art professionals would say) for a piece and once works have been sold, dealers and collectors alike will try to maintain that market, ensuring that a work will rarely go down in price.
I may not have answered the question of whether you should or shouldn’t invest in art (there are many different factors involved!) but I hope I have given you some food for thought.
This article was published on www.salutions.co.uk